FEATURES

DOCUMENTS

Accounts of individuals

1)Passport 2) Pan card 3) Voter ID 4)

Driving license 5) Identity card 6) Letter
authority
1)Legal name and any other names used from a recognized public
or public servant verifying the identity
2)Correct permanent address
and residence of the customer to the
satisfaction of bank. 7)telephone bill 8)
bank account statement 9)letter from any
recognized public authority
Accounts of companies
1)Name of the company
2)Mailing address of the company

1) Certificate of incorporation and

Memorandum & Articles of Association
2) Resolution of the Board of Directors
to open an account and identification
of those who have authority to
operate the account
3) Copy of PAN allotment letter

Accounts of partnership firms

1)Registration certificate 2) Partnership

deed 3) Power of Attorney granted to a
1)Legal name 2)Address 3)Names of all partner or an employee of the firm to
transact business on its behalf 4) Any
partners and their addresses 4)Telephone officially valid document identifying the
partners and the persons holding the
numbers of the firm and partners
Power of Attorney and their addresses
4) Telephone bill in the name of partners
Accounts of trusts & foundations
1)Names of trustees, settlers,
beneficiaries and signatories
2)Names and addresses of the founder,
the managers/directors and the
beneficiaries
Telephone/fax numbers

1) Certificate of registration, if
Registered. Power of Attorney granted to
transact business on its behalf
2) Any officially valid document to
identify settlers, beneficiaries and those
holding Power of Attorney
founders/managers/directors addresses
3) Resolution of the managing body of
1

foundation/association Telephone bill

CHAPTER NO.1
INTRODUCTION TO BANK:
MEANING OF BANK:
A bank is a financial intermediary that
accepts deposits and channels those
deposits into lending activities, either
directly or through capital markets. A
bank connects customers with capital
deficits to customers with capital
surplus.
Banking is generally a highly regulated
industry, and government restrictions on financial activities by banks have
varied over time and location. The current set of global bank capital
standards is called Basel II. In some countries such as Germany, banks have
historically owned major stakes in Industrial Corporation while in other
countries such as U.S.A banks are prohibited from owing non-financial
companies. In Japan, banks are usually the nexus of a cross-share holding
entity known as keiretsu.

DEFINITION:
The definition of a bank varies from country to country. Under English
common law, a banker is defined as a person who carries on the business of
banking, which is specified as: conducting current accounts for his
customers

paying cheques drawn on him, and

Collecting cheques for his customers.

BANKING:
Sec 5 ( c ) of banking regulation act 1949 define banking as accepting for
the purpose of lending or investment of deposits of money from public
repayable on demand or otherwise, withdrawal by cheque, draft, or order

ROLE OF BANKING:
Banks provide funds for business as well as personal needs of individuals.
They play a significant role in the economy of a nation. Let us know about
the role of banking.
It encourages saving habit among people and thereby makes funds available
for productive use.
It acts as an intermediary between people having surplus money and those
requiring money for various activities.
It facilitates business transactions through receipts and payments by cheques
instead of currency.
It provides loans and advances to businessmen for short term and long term
purposes.
It also facilitates import export transactions.
It helps in raising the standard of living of people in general by providing
loans for purchase of customer durable goods, houses, automobiles, etc.
It helps in national development by providing credit to farmers, small scale
industries and self employed people as well as to large business houses
which lead to balanced economic development in country.

FUNCTIONS OF BANKS:
PRIMARY FUNCTIONS:
1. BORROWING:
It means collection of deposits from public in the form of savings account,
recurring deposits account; saving and current deposits are demand deposits
because these have to be repaid by bank as and when demanded ,where as
recurring and fixed deposits are time deposits because they are to be repaid
by banks after a specific period of time. Banks pay the interest on deposits
collected by them.
2. LENDING:
Out of deposits collected by banks some amount is utilized for granting
loans for trade industry, transportation or any other business activity.
Banks charge interest on loans granted. The difference between the interest
earned by banks on loans granted and interest paid on deposits received is
called as profits of banks

SECONDARY FUNCTIONS:
A. AGENCY FUNCTION:
1. COLLECTIONS:

Cheques received and deposited by the customers with bank are collected by
the bank through the clearing house and the amount is credited to customers
account.

2. REMITTANCE:
As per the instruction of customer money can be transferred from one
branch to another. The bank also undertakes telegraph transfer. Telegraph
transfer is a negotiable instrument which facilitates quick transfer of money
from one branch to another branch of same bank.

3. PERIODIC PAYMENTS:
As per the instructions of a
customer various payments are
made by banks regularly on behalf
of their customer by debiting their
account.

B. UTILITY FUNCTIONS:
1. DEBIT CARDS:

In case of debit cards the amount used by account holders either for
shopping or withdrawing cash through ATM gets directly debited to his bank
account. The bank balance of a customer immediately gets reduce.

3.

CASH CREDIT:
Most of the commercial banks started
giving the facilities of cash credit to
their trustworthy customers, so that
they can effectively ease payments through credit cards upon a certain limit.
The customer enjoys the credit for a period or around 30-60 days.

4. SAFE DEPOSITS VAULT:

Valuables like gold, silver and some important documents like property
papers, insurance papers, can be kept in safe custody of bank by paying
yearly rentals.
8

5. CREDIT INFORMATION:
Banks provide credit information regarding their customers to their suppliers
in order to facilitate internal trade.

TYPES OF BANK:
Banks can be classified into various types on the basis of their functions,
ownership, domicile, etc. The following are the various types of banks:
1. Commercial Banks:
The bank which performs all kinds of banking business and generally
finance trade and commerce, are called commercial banks. Since their
deposits are for a short period, these banks normally advance short term
loans to the businessmen and traders and avoid medium term and long term
lending.
9

However, recently the commercial banks have also extended their areas of
operations to medium term and long term finance. Majority of commercial
banks are in the public sector. However, there are certain private sector
banks operating as joint stock companies. Hence, the commercial banks are
also called joint stock banks.
2. Industrial Banks:
Industrial banks are also known as investment banks, mainly meet the
medium term and long term financial needs of the industries. Such long term
needs cannot be met by the commercial banks, which generally deal with
short term lendings.
The main functions of industrial banks are:
They accept long term deposits.
They grant long term loans to the industrialist to enable them to purchase
land, construct factory building, purchase heavy machinery etc.
They help selling or even underwrite the debentures and shares of industrial
firms.
They can also provide information regarding the general economic position
of the economy. In India, industrial hanks, like IDBI, IFCI are playing
significant role in industrial development of the country.
3. Agricultural Banks:
Agricultural credit needs are different from those of industry and trade.
Industrial and commercial banks normally do not deal with agricultural
finance. The agriculturist requires:
Short term credit to buy seeds, fertilizers and other inputs ,and

10

 Long term credit to purchase land, to make permanent improvements on

land, to purchase agricultural machinery and equipment, etc. In India
agricultural finance is generally provided by co-operative institutions.
Agricultural co-operatives provide the long term credit to the agriculturists.
4. Exchange Banks:
Exchange banks deals in foreign exchange and specialize in financing
foreign trade. They facilitate international payments through the sale,
purchase of BOE, and thus play an important role in promoting foreign
trade.
5. Saving Banks:
The main purpose of saving banks is to promote saving habits among the
general public and mobilize their small savings. In India, postal saving
banks do this job. They open accounts and issue postal cash certificates.

6. Central Bank:
Central bank is an apex institution, which controls, regulates and supervises
the monetary and credit system of the country. Important functions of the

central bank are:

It has the monopoly of note issue
It act as a banker, agent and financial advisor to state
It is the custodian of member bank reserves
It is the custodian of nations reserves of international currency
It serves as the lender of the last resort
It functions as the bank of central clearance, settlement and transfer
It acts as the controller of credit. Besides these functions, Indias central
bank i.e. the RBI also performs many development functions to promote
economic development in country.
11

7. Classification on basis of ownership:

On the basis of ownership banks can be classified into three categories:
a) Public sector banks:
These are owned and controlled by the government. In India, the
nationalized banks and the regional rural banks come under these categories.
b) Private sector banks:
These banks are owned by the private individuals or corporations and not by
the government or co-operative societies.
c) Cooperative banks:
Cooperative banks are operated on the cooperative lines. In India,
cooperative credit institutions are organized under the cooperative societys
law and play an important role in meeting financial needs in the rural areas.
8. Classification on the basis of domicile:
On the basis of domicile, the banks are divided into two categories:
a. Domestic banks:
These are registered and incorporated within the country
b. Foreign banks:
These are foreign in origin and have their head offices in the country of
origin.
9. Scheduled and non scheduled banks:
In India banks have been broadly classified into scheduled and non
scheduled banks. A scheduled bank is that which has been included in the
second scheduled of the RBI Act 1934 and fulfills the two conditions:
It has a paid up capital and reserves of at least Rs. 5 lakhs. It ensures the
Reserve bank that its operations are not detrimental to the interest of
depositors
It is a corporation or a cooperative society and not a partnership or a single
owner firm. The banks which are not included in the second scheduled of the
RBI Act are non scheduled banks.
12

CHAPTER NO. 2
KNOW YOUR CUSTOMER
INTRODUCTION:
Know your customer (KYC) is the due diligence and bank regulation that
financial institutions and other regulated companies must perform to identify
their clients and ascertain relevant information pertinent to doing financial
business with them. In the U.S.A, KYC is typically a policy implemented to
confirm to a customer identification program mandated under the bank
secretary act and USA PATRIOT Act. KYC policies are becoming
increasingly important globally to prevent identity theft, fraud, money
laundering and terrorist financing.
One aspect of KYC checking is to verify that the customer is not on any list
of known fraudsters, terrorist or money launders, such as the Office of
Foreign Assets Controls Specially Designated Nationals list. This list
13

contains thousand of entries and is updated at least monthly. As well as

sanctions lists there are third party vendors that track links between persons
regarded as high risk owning to negative reports in the media about them or
in public records.
Beyond name matching, a key aspect of KYC controls is to monitor
transactions of a customer against their recorded profile, history on the
customers account(s) and with peers.
Know your customer processes are also employed by regular companies of
all sizes, for the purpose of ensuring their proposed agents, consultants or
distributors anti-bribery compliance. Banks, insurers and export credit
agencies are increasingly demanding that customers provide detailed anticorruption due diligence information, to verify their probity and integrity.

HISTORY:
KYC regulations have gone through an evolutionary process over the past
few years. In general, it requires an MF investor to register with a central
database by providing his/her Permanent Account Number, name, address
and a few other details. When these particulars change, the investor is
required to submit a change request to update the registry. The purpose for
this registration, ostensibly, is to prevent money laundering by ensuring that
people are making investments on their own behalf.
When it started out, this registration was required only for people investing
above Rs. 50,000. It was then expanded to any amount for certain categories
of investors such as non-resident Indians or online investors. In January

14

2011, it was made mandatory for all MF investors to get registered. Finally,
in January 2012, SEBI made a significant overhaul to the process.
Until December 2011, there was one registrar for KYC and that was CVL
India. They authorized POS across the country to accept applications (both
fresh and change requests), do preliminary processing and issue
acknowledgements. Starting January 2012, however, all the POS were
cancelled (which is why the CVL POS list is empty) and only SEBIauthorized intermediaries such as brokers and MF companies were allowed
to process KYC. Also, they were allowed to process them only for their
customers (which is why you were asked to invest). SEBI did this to ensure
there would be multiple registrars (not just CVL).
This brings us around to your situation. CAMS, Karvy (as authorized
operating back office units of MF companies) and MF company offices
themselves are the only places where you can get your KYC updated under
the current regulations. The best course for you would be to see which MF
company you are holding a folio in and go to their office to submit your
KYC change request. They should not ask for an additional investment since
you are already their customer.

Definition of KYC:I.

The activities of customer due diligence that financial institutions and other
regulated companies must perform to identify their clients and ascertain
relevant information pertinent to doing financial business with them and the
bank regulation which governs those activities

15

II.

A standard form in the investment industry that ensures investment advisors

know detailed information about their clients' risk tolerance, investment

III.

knowledge and financial position.

KYC forms protect both clients and investment advisors. Clients are
protected by having their investment advisor know what investments best
suit their personal situations. Investment advisors are protected by knowing
what they can and cannot include in their client's portfolio.
In the USA, KYC is typically a policy and process implemented to conform
to a customer identification program (CIP) mandated under the Bank
Secrecy Act and USA PATRIOT Act. Know your customer policies are
becoming increasingly important globally to prevent identity theft, financial
fraud, money laundering and terrorist financing.

Key KYC policy elements:

KYC policy has five major elements. We will take a brief look at each in
turn.

16

Customer acceptance: The point at which a new customer is accepted or

rejected is the easiest point at which the risk of dealing with illegal money
can be avoided. By following good customer acceptance policies, dealing
with entities and individuals who might engage in illegal transactions can be
avoided.
Customer identification: Establishing the identifying of customers is
central to the KYC policy both for the customer acceptance or rejection
decision and for the ongoing monitoring of customers account and
transactions. By identifying customers effectively, the business is able to
deal with them in appropriate manner.
Customer verification: Verifying that customers are who they say they are
is vital to any customer identification procedure. Merely collecting customer
information is not enough for an effective KYC policy. Reliable and
independent documentation should be used to support and confirm the
identification details a customer provides. For example, citing an original
primary photographic identification document such as a passport or drivers
license.
Accounts and transactions monitoring: In an effective KYC policy,
customer accounts and transactions are properly classified in terms of risk
and are regularly monitored. Through checks and thresholds, unusual
activities, activities by high-risk customers, or suspicious behavior can be
detected and reviewed.
Risk management: To ensure that the risks posed by money laundering and
other criminal activities are identified, mitigated and managed good risk
management practices are essential.

17

Risks mitigated by KYC:

Let's take a brief look at the risks that can be mitigated by an effective KYC
policy. There are five types of risks that an effective KYC policy can help to
mitigate:
Reputational
Operational
Legal
Financial
Concentration.

Reputational risk:
The reputation of a business is usually at the
core of its success. The ability to attract good
employees, customers, funding and business is
dependent on reputation. Even if a business is
otherwise doing all the right things, if customers
are permitted to undertake illegal transactions
through that business, its reputation could be
irreparably damaged. A strong KYC policy helps
to prevent a business from being used as a vehicle for illegal activities.

18

Operational risk: This is the risk of

direct or indirect loss from faulty or failed
internal

processes,

systems.

In

management

today's

and

competitive

environment, operational excellence is

critical for competitive advantage. If a
KYC

policy

is

faulty

or

poorly

implemented, then operational resources

are wasted, there is an increased chance of being used by criminals for
illegal purposes, time and money is then spent on legal and investigative
actions and the business will be viewed as operationally unsound.

Legal risk: If a business is used as a vehicle for illegal activity by

customers, it faces the risk of fines, penalties,
injunctions and even forced discontinuance of
operations.

Apart

from

regulatory

risk,

involvement in illegal activities could lead to thirdparty judgments and unenforceable contracts. In
addition, professionals working within many
financial and other professional sectors may also
personally be subject to legal action or prosecution.
Due to the nature of business, these risks can never
entirely be eliminated. However, if a business does not have an effective
KYC policy, it will be inviting legal risk. By strictly implementing and

19

following a KYC policy, a business can

mitigate legal risk to itself and its staff.
Financial risk: If a business does not
adequately identify and verify customers, it
may run the risk of unwittingly allowing a
customer to pose as someone they are not.
The consequences of this may be far
reaching. If a business does not know the true identity of its customers, it
will also be difficult to ret rieve any money that the customer owes.

Concentration risk: This type of risk

occurs on the assets side of a business if
there is too much exposure to one
customer
customers.

or
It

group

also

of

occurs

related
on

the

liabilities side if the business holds large

concentrations

of

funds

from

one

customer or group (in which case it faces liquidity risk if these funds are
suddenly withdrawn).
By implementing an effective KYC policy, a business can identify the entire
scope of the asset and liability risk faced in relation to each customer and
group of customers.

20

The four principle areas of risk

Type of person
In general, domestic customers may be at a lower risk due to the easy
availability of information to verify their identities. Offshore customers,
especially those who do not have a domestic business or residence, may be a
higher risk due to the difficulty in easily obtaining and verifying information
about such customers.
Offshore customers may also be classified in terms of their country of origin.
This is because the level of anti-money laundering regulation and
enforcement varies considerably from country to country.

Origins
A customer may have several origins. In the case of an individual, it could
mean country of citizenship, place of birth or principal place of residence or
business. In the case of a corporation, it could mean jurisdiction of
incorporation or regulation, principal place of business or location of
principal assets.

Type of service or product

Reporting entities need to be aware of the type of product or service that
they offer to a customer and the vulnerability that product or service poses to
being used to launder money or finance terrorism. For example an account
with multiple signatories may pose a higher risk than an account with one

21

signatory. This is because the more people transacting on an account, the

greater the exposure to criminal behavior.

Blacklists
When a business provides a different product or service to a new or existing
customer it should be aware of the 'blacklist'. Regulators and government
departments in different countries, such as the Australian Department of
Foreign Affairs and Trade and the US Department of the Treasury, publish
blacklists of various entities.
Blacklisted entities
Blacklists may cover:
Countries and government institutions
Individuals
Companies
Charitable organizations and non-profit associations
known terrorist groups and their affiliates

Blacklist purposes
The purpose of blacklists varies, but includes prevention or curtailment of
the following:
Money laundering
Terrorism
Weapons of mass destruction
Drug production or smuggling
22

 Corruption

Blacklist sanctions
Sanctions imposed on blacklisted entities can include:
Arrest and extradition
freezing of assets
Prohibition on dealing with third parties

CHAPTER NO. 3
Enhanced due diligence
EDD has not been internationally defined, the USA PATRIOT Act dictates
that institutions "shall establish appropriate, specific, and, where necessary,
enhanced, due diligence policies, procedures, and controls that are
reasonably designed to detect and report instances of money laundering
through those accounts."
US regulations require that EDD measures are applied to account types such
as Private banking, Correspondent account, and Offshore banking
institutions.
Because regulatory definitions are neither globally consistent nor
prescriptive, financial institutions are at risk of being held to differing
standards dependent upon their jurisdiction and regulatory environment. An
article published by Peter War rack in the July 2006 edition of ACAMS
Today (Association of Certified Anti-Money Laundering Specialists)
suggests the following:
23

A rigorous and robust process of investigation over and above (KYC)

procedures, that seeks with reasonable assurance to verify and validate the
customers identity; understand and test the customers profile, business and
account activity; identify relevant adverse information and risk assess the
potential for money laundering and / or terrorist financing to support
actionable decisions to mitigate against financial, regulatory and reputational
risk and ensure regulatory compliance..

Characteristics of EDD
Rigorous and robust:
Generally this means consistent, thorough and accurate. The
process must be documented and available for inspection by
regulators.
The process must be SMART (Specific, Measurable, Achievable, Relevant
and Time bound), scalable and proportionate to the risk and resources.
An IT workflow system ensuring that the KYC process and procedures are
Defined, Repeatable and Measurable is recommended.
Over and above KYC procedures:
EDD files rely upon initial client screening. This definition requires
revalidation of the customers identity knowing the clients identity, not
who they say they are. EDD processes should use a tiered approach
dependent upon the risk.
24

Crucial to the integrity of any EDD process is the reliability of information

and information sources, the type and quality of information sources used,
properly trained analysts who know where to look for information, how to
look and how to corroborate, interpret and decide the results. Open source
intelligence companies such as World Compliance and C6, aggregate this
information and compile it daily into a comprehensive database.
Searching on Google, for example, means different things to different
people. Experience has shown poor returns from staff that believed they
were experienced, but in practice were not and consequently failed to find
relevant information.

Reasonable assurance
What is reasonable depends upon factors including jurisdiction, risk,
resources, and technology state of the art. For sanction matches it depends
upon information provided by regulators. In all cases the suggested standard
is to the civil standard of proof i.e. on the balance of probability.
Relevant adverse information
Information obtained from any source, including the Internet, free and
subscription databases and the media, which is directly or indirectly
indicative of involvement in money laundering, terrorist financing or
predicate offenses.
Examples include fraud and other dishonesty, drug trafficking, smuggling or
other proscribed offences, references to money laundering, or conducting
25

business, residing in or frequenting countries deemed by the Financial

Action Task Force and/or (institution) as being countries under sanction or
countries with which (institution) does not do business; to official sanctions
or watch lists; and to investigations, convictions or disciplinary findings by
authorized regulatory bodies

KYC Process Capability Maturity Model

A series of draft KYC Capability Maturity Model was published and shared
for peer review with a range of international KYC practitioners in 2009 2011. An Updated version will be published in the ACAMS Today magazine
in late 2012.
The KYC Maturity Model is based on the typical 5 levels of the standard
Capability Maturity Model. These levels are typically described as Initial,
Repeatable, Defined, Managed and Optimized and have very strict
meanings. The KYC maturity has however been somewhat simplified,
renamed and re-built as follows: Chaotic, Reactive, Proactive, Service
26

Managed and Value Managed. Practical process improvement learning has

also been taken from common manufacturing and IT productivity
methodologies such as Lean, Agile, 6-Sigma, ITIL and Balanced Scorecard.

Customer Due Diligence

CDD refers to the monitoring of clients and their activities to see if the client
does not change markedly over time. In effect this combats the possibility
that an individual (or more often an organization) that has passed KYC is
still who they Say they are and doing what they said they underwent KYC
checks. For example a corporate account set up honestly and openly by one
person who passes KYC checks could be passed years later to another
person that would not, without CDD the services provider would not know
that the new owner is present. KYC (CCD) policy would normally demand
KYC checks on the new owner regardless of the account history.

27

Laws by country

India: The Reserve Bank of India introduced KYC guidelines for all
banks in 2002. In 2004, RBI directed that all banks ensure that they are fully
compliant with the KYC provisions before December 31, 2005. The purpose
was to prevent money laundering, terrorist financing and theft.

South Africa: The Financial Intelligence Centre Act 38 of 2001

(FICA)

USA: Pursuant to the USA Patriot Act of 2001, the Secretary of the
Treasury was required to finalize regulations before October 26, 2002, so
KYC is now mandatory for all US banks

New Zealand: Updated KYC laws were enacted in late 2009, and
entered into force in 2010. KYC is mandatory for all registered banks and
financial institutions (the latter being given an extremely wide meaning).

Benefits of KYC

KYC program has benefits for both authority/banks/FIs as well as for

customers too. What are these benefits, have a look.

28

For Authority
Its main purpose and benefit is Anti Money Laundering. It enables to stop
money laundering through illegal activity or source
It enables banks to understand their customers and their financial activities.
It helps banks/FIs to manage their financial dealings with their customers.
It helps to check necessary requirements at the time of opening account or
getting involved in business dealing, and ensures the identity of a customer,
whether they belongs from a criminal background or banned entities such
like terrorists or illegal organizations.
It helps banks/FIs in Monitoring of Transactions of their customers.
And some other benefits too.

For customer
Good communication between banks/FIs: Customers get directly benefited
in terms of a good communication relationship between their banks/FIs.
Proper information on time: By this a customer gets proper information's on
time, and never lets any chance go.
Good image in banks/FIs: By fulfilling the KYC formality, a customer
builds good image of himself in front of banks/FIs.
29

CHAPTER NO.4
MONEY LAUNDERING
Money laundering refers to conversion
of money illegally obtained to make it
appear as if it originated from a
legitimate source. Money laundering is
being

employed

by

launders

worldwide to conceal criminal activity

associated with it such as drugs / arms
trafficking, terrorism and extortion. All
crimes that produce a financial benefit give rise to money laundering.

DEFINITION:
Section 3 of PMLA has defined the offence of money laundering as under:
Whosoever directly or indirectly attempts to indulge or knowingly assists
or knowingly is a party or is actually in any process or activity connected
with the proceeds of crime and projecting it as untainted property shall be
guilty of offence of money laundering

30

Three stages of money laundering:

The money laundering process is typically segmented into three stages:
Placement
At this stage, illegal funds or assets are first brought into the financial
system. This placement makes the funds more liquid. For example, if cash
is converted into a bank deposit, it becomes easier to transfer and
manipulate. Money launderers place illegal funds using a variety of
techniques, which include depositing cash into bank accounts and using cash
to purchase assets.
Layering
To conceal the illegal origin of the placed funds and thereby make them
more useful, the funds must be moved, dispersed and disguised. The process
of distancing the placed funds from their illegal origins is known as
layering. At this stage, money launderers use many different techniques to
layer the funds. These include using multiple banks and accounts, having
professionals act as intermediaries and transacting through corporations and
trusts. Funds may be shuttled through a web of many accounts, companies
and countries in order to disguise their origins.
Integration
Once the funds are layered and distanced from their origins, they are made
available to criminals to use and control as apparently legitimate funds. This
final stage in the money laundering process is called integration. The
laundered funds are made available for activities such as investment in
legitimate or illegitimate businesses, or spent to promote the criminal's
31

lifestyle. At this stage, the illegal money has achieved the appearance of
legitimacy.

Volume of Money Laundering Activity

10
20

45
25

AML: International Law and Practice gives a concise overview of:

How institutions like the UN Security Council, the EU or the Wolfs berg
Forum develop ways to fight money laundering and terrorist financing, and
how the Recommendations of the FATF and the Derivatives of European
Commission concerning AML/CFT are implemented in the legislation of
their member countries includes detailed information from a wealth of
specialist outlining the implementation of anti money laundering measures
in a total of 41 countries and territories.
Accordingly, the handle book is a must for everyone whose activities are
affected by AML/CFT regulations as well as the principal point of reference
in this field from an international perspective. Anti-Money Laundering is
the definitive reference on money laundering and practice. First an outline
will be given of the general approach taken by supra natural organization
like the United Nations and the European Council. Next the approach taken
by international organizations and initiatives on the basis of the supra
32

national initiatives will be outlined by senior members of those

organizations. A number of countries will then describe their specific
prevention legislation. Countries involved will all be member-countries of
the FATF (Financial Action Task Force on Money Laundering). Finally there
will be an overview to the reader to make a comparison between the most
important topics of money laundering legislation and rules in the different
countries.

Effects of money laundering on customer:

A key defense against money laundering is to prevent accounts being opened
in false identities. Anyone wishing to open an account will therefore be
asked for proof of their identity and address. These documents have to be
essentially obtained irrespective of the type of account to be opened and the
purpose for which the account is opened for.
The fact these documents are asked for opening of account does not mean
that you are suspected of money laundering. Criminals try to appear to be
normal law-abiding customers, for example they may to open a number of
accounts using small of money. Hence it is necessary to identify all
prospective account holders or customers. Anybody including could falsely
use your identity, if these identity documents are not obtained.

Identity proof required for money laundering:

The best identification documents are those, which are issued by a
Government authority, which should have a photograph, address and
33

signature. For individual documents like copy of passport, election Identity

Card, PAN Card, etc. would be sufficient for the purpose of establishing the
identity. Similarly, for other entities like firms, trusts, etc., documents like
partnership deed, trust deed, memorandum & articles of association,
certificate of incorporation, etc. would be applicable and the branch/sales
staff/call center would be able to help you in providing the details of the list
of approved documents.

Failure in providing the required documents to the bank:

The bank will be entitled to refuse to open the account (if you are a
prospective customer) or discontinue its relationship with you citing nonproviding of KYC information / documents (if you are an existing
customer). If you however, require reasonable time to furnish certain noncritical documents you can approach the branch/sales staff.

Small depositor has to go through the stringent KYC

requirements:
While the internal procedures of the bank and the guidelines of RBI require
that satisfactory proof of your identity and address, RBI has simplified the
KYC procedure with the objective of greater financial to those persons who
intend to keep balances not exceeding Rupees Fifty Thousand (Rs. 50000/-)
34

in all their accounts taken together and the total credit in all the accounts
taken together is not expected to exceed rupees one lakh (Rs. 100000/-) in a
year.

Help us to help you:

Please help us to prevent crime, tax evasion and the laundering of the
proceeds of such crime or evasion by being patient when staff asks you to
provide documents to prove your identity. You can also help prevent crime
against yourself and others by maintaining the confidentiality of your
account details and identity documents.

Indian regulations on prevention of money laundering a

customer must know:
Under the prevention of Money Laundering Act (PMLA) 2002, and the
Rules thereof, the banks are required to report: All cash transactions (deposits and withdrawals) of the value of more than
Rupees Ten Lakh or equivalent thereof in foreign currency;

35

 All series of cash transactions integrally connected to each other, which have
been valued below rupees ten lakhs or its equivalent in foreign currency
where such series of transactions exceeds Rupees Ten Lakhs.
All cash transactions where forged or counterfeit currency notes or bank
notes have been used as genuine and where any forgery of a valuable
security has taken place;
All suspicious transactions whether or not made in cash and by way of as
mentioned in the Rules.

CHAPTER NO.5
GUIDELINES ON KYC NORMS

Know your customer standards:

36

The main objective of the KYC policy is to prevent banks from

being used, intentionally or unintentionally, by criminal elements
for money laundering activities. KYC procedures also enable
Banks to know and understand their customers and their financial
dealings better which in turn help them manage their risks
prudently. Banks should frame their KYC policies incorporating
the following key elements:
1. Customer Acceptance Policy
2. Customer Identification procedures
3. Monitoring of transactions
4. Risk Management

Guidelines for opening of new accounts:

Opening of account amounts to a contract between the bank and the
customer in which the parties assume certain obligations and become
37

entitled to certain legally enforceable rights. Hence, the Bank has to ensure
that the prospective customer has contractual capacity and also has any
restrictions are imposed by any law on the contractual capacity of the
prospective customer before opening deposit account for him/her.
The prospective account holder should normally be required to fill in the
account opening form in the presence of banks official. The account will not
be normally opened without meeting between bank official and the
customer.
In the case of a prospective customer who is a corporate or large borrower
enjoying credit facilities from more than one bank, branches should carry
out the due diligence while opening the account. Branches should inform the
fact of opening of account to the consortium leader, if the account is under
consortium, or the banks concerned, if it is under multiple banking
arrangement. Branches may open current accounts of prospective customers
in case no response is received from the existing bankers after a minimum
waiting period of a fortnight. If response is received within a fortnight,
branches should assess the situation with reference to the information
provided by the bank concerned on the prospective customer. Branches are
not required to solicit a formal No objection certificate from the existing
bankers consistent with the true freedom to the customer of banks as well as
needed due diligence by the bank on the customer.
New accounts should be opened only with cash. In special cases (e.g., NRI,
Government accounts, etc.) Cheques on our Bank drawn in favor of the
prospective customer may be accepted for opening the account. No account
should be opened with cheques in favor of some third party and endorsed in
favor of the prospective customer.

38

KYC for the existing accounts:

While the KYC guidelines will apply to all new customers, the same would
be applied to the existing customers on the basis of materiality and risk.
However, transactions in existing accounts would be continuously monitored
for any unusual pattern in the operation of the accounts should trigger a
review of the CDD measures. Banks may consider applying monetary limits
to such accounts based on the nature and type of the account. It may,
however, be ensured that all the existing accounts of companies, firms,
trusts, charities, religious organizations and other institutions are subjected
to minimum KYC standards which would establish the identity of the
natural/legal person and those of the beneficial owners. Banks may also
ensure that terms/recurring deposit accounts at the time of renewal and
subjected to revised KYC procedures.
Where the bank is unable to apply appropriate KYC measures due to nonfurnishing of information and/or non-cooperation by the customer, the bank
may consider closing the account or terminating the banking /business
relationship after issuing due notice to the customer explaining the reasons
for taking such a decision. Such decisions need to be taken at a reasonably
senior level.

Accounts of companies and firms:

Banks need to be vigilant against business entities being used by individuals
as a front for maintaining accounts with the banks. Banks should examine
the control structure of the entity, determine the source of funds and identify
the natural persons who have a controlling interest and who comprise the
39

management. These requirements may be moderated according to the risk

perception.

CHAPTER NO.6
CUSTOMER ACCEPTANCE POLICY (CAP)
Banks may prepare a profile for each new customer based on risk
categorization. The customer profile may contain information relating to
customers identity, social/financial status, nature of business activity,
information about his clients business and their location etc. the nature and
extent of due diligence will depend on the risk perceived by the bank. For
the purpose of risk categorization, individuals(other than high net worth) and
entities whose identities and sources of wealth can be easily identified and
transactions in whose accounts by and large confirm to the known profile,
may be categorized as low risk customers that are likely to pose a higher
than average risk to the bank may be categorized as medium or high risk
depending on customers background, nature and location of activity, country
of origin, sources of funds and his client profile etc. banks may apply
enhanced due diligence measures based on the risk assessment, thereby
requiring intensive due diligence for higher risk customers, especially
requiring higher due diligence may include:
1) Nonresident customers

40

2) High net worth individuals

3) Trusts, charity, NGOs and organizations receiving ownership
4) Firms with sleeping partners
5) Politically exposed persons of foreign origin
6) Non face to face customers
7) Those with dubious reputation as per public information available, etc.
It is important to bear in mind that the adoption of customer acceptance
policy and its implementation should not become too restrictive and must
not result in denial of banking services to general public, especially to those
who are financially or socially disadvantaged.
Banks should develop a clear customer acceptance policy laying down
explicit criteria for acceptance of customers. The customer acceptance
policy must ensure that explicit guidelines are in place on the following
aspects of customer relationship in bank.
No account is to be opened in anonymous or fictitious name(s)/entity(ies)
Circumstances, in which a customer is permitted to act on behalf of another
person/entity, should be strictly followed so as to avoid occasions when an
account is operated by a mandate holder or where an account may

be

opened by an intermediary in the fiduciary capacity.

Accept customers only after verifying their identity, as laid down in
Customer Identification Procedures (discussed later). Necessary checks
before opening a new account are to be ensured so that the identity of the
customer does not match with any person with known criminal background
41

or with banned entities such as individual terrorists or terrorist organizations

available from Circulars, etc.
Classify customers into various risk categories and, based on risk perception,
apply the acceptance criteria for each category of customers. Also, a profile
of each customer will be prepared based on risk categorization.
Not to open an account or close an existing account (except as provided in
this Policy), where identity of the account holder cannot be verified and/or
documents/information required could not be obtained/confirmed due to
non-cooperation of the customer

CHAPTER NO.7
CUSTOMER IDENTIFICATION PROCESS (CIP)
Customer identification requires identifying the customer and verifying
his/her identity by using reliable, independent source documents, data or
information. Thus, the first requirement of Customer Identification
Procedures (CIP) is to be satisfied that a prospective customer is actually
who he/she claims to be. The second requirement of CIP is to ensure that
sufficient information is obtained on the identity and the purpose of the
intended nature of the banking relationship. This would enable risk profiling
of the customer and also to determine the expected or predictable pattern of
transactions.
Identification data, as under, would be required to be obtained in respect of
different classes of customers:
For customers that are natural persons:
a) Address/location details
42

b) Recent photograph
For customers that are legal persons:
a) Legal status of the legal person/entity through proper and relevant
documents.
b) Verification that any person purporting to act on behalf of the legal
person/entity is so authorized and identity of that person/entity is established
and verified.
c) Understand the ownership and control structure of the customer and
determine who are the natural persons who ultimately control the legal
person.

Wherever applicable, information on the nature of business activity,

location, mode of payments, volume of turnover, social and financial status
etc. will be collected for completing the profile of the customer. Customers
will be classified into three risk categories namely High, Medium and Low,
based on the risk perception. The risk categorization will be reviewed
periodically.
The Customer Identification Procedures are to be carried out at the following
stages:
While establishing a banking relationship;
When the bank feels it is necessary to obtain additional information from the
existing customers based on the conduct or behavior of the account.
Customer identitification data (including photograph/s) should

be

periodically updated after the account is opened. Such verification should be

43

done at least once in five years in case of low risk category customers and
not less than once in two years in case of high and medium risk customers.
Customer Identification will also be carried out in respect of nonaccount
holders approaching bank for high value one-off transaction as well as any
person or entity connected with a financial transaction which can pose
significant reputational or other risks to the Bank.

CHAPTER NO.8
KYC INFORMATION FOR CUSTOMERS
INTENDING TO OPEN BANK ACCOUNT WITH US:
The Reserve Bank of India has advised banks to follow a KYC guidelines,
wherein certain personal information of the account-opening prospectus or
the customer is obtained. The objective of doing so is to enable the bank to
have positive identification of its customers. This is also in the interest of
customers to safeguard their hard earned money. The KYC guidelines of
RBI mandate banks to collect three proofs from their customers. They are:
44

1. Photograph
2. Proof of identity
3. Prof of address
Accordingly, Axis Bank has framed its KYC procedure according to which,
a photograph and documentary proof of personal identification and address
proof are required to be provided
Our KYC procedure specifies certain commonly available documents as
proof of personal identification and address proof, so as to not cause
inconvenience to those intending to open bank accounts in our bank. The
account opening form provides the nature of documents required/procedure
to be followed for opening a new account.

45

CHAPTER NO.9
KYC-WHAT YOU MUST KNOW
KNOW YOUR CUSTOMER:
KYC enables bank to know/ understand their customers and their financial
dealings to be able to serve than better

BANK CUSTOMER:
For the purpose of KYC, a customer is defined as:

A person or entity that maintains an account and/or has a business

relationship with the bank.

One on whose behalf the account is maintained (i.e., the beneficial owner)
Beneficiaries of transactions conducted by professional intermediaries, such
as Stock Brokers, Chartered Accountants, Solicitors etc., as permitted under

the law, and

Any person or entity connected with a financial transaction which can pose
significant reputational or other risks to the bank, say, a wire transfer or issue
of a high value demand draft as a single transaction.

PROOF OF IDENTITY AND ADDRESS REQUIRED BY

BANK:
The identification of a customer is a very critical process with a view to
protect the customer interest by preventing from fraudsters who may use the
name, address and forge signature to undertake illegal business activity,
encashment of stolen drafts, cheques , dividend warrants, etc. Identification
of customers will also help to control financial frauds, identify ML and

46

suspicious activities, and for scrutiny/ monitoring of large value cash

transactions.

KYC REQUIREMENTS:
KYC requirements have always been in place and banks have been taking
KYC documents in accordance with the guidelines issued by RBI from time
to time. RBI has visited the KYC guidelines in the context of
recommendations made by the FATF on Anti Money Laundering standards
and on Combating Financing of Terrorism and enhanced the KYC standards
in line with international benchmarks
COMPULSION OF KYC:
It is a regulatory and legal requirement
Regulatory: In terms of the guidelines issued by the RBI on November 29,
2004 on KYC standards AML Measures, all banks are required to put in
place a comprehensive policy framework covering KYC Standards and
AML Measures.
Legal: The prevention of Money Laundering Act,2002(PMLA) which came
into force from July 1,2005 also requires banks, Financial Institutions and
Intermediaries to ensure that they follow certain minimum standards of KYC
and AML as laid down in the Act and the rules framed there under
KYC WILL BE CARRIED OUT AT FOLLOWING STAGES:
Opening a new account
47

 Opening a subsequent account where documents as per current KYC

standards not been submitted while opening the initial account
Opening a locker facility where these documents are not available with the
bank for all the locker facility holders.
When the bank feels it necessary to obtain additional information from
existing customers based on conduct of the account
When there are changes to signatories, mandate holders, beneficial owners
etc.
FEATURES

DOCUMENTS

Accounts of individuals

1)Passport 2) Pan card 3) Voter ID 4)

Driving license 5) Identity card 6) Letter
from a recognized public
authority
or public servant verifying the identity
and residence of the customer to the
satisfaction of bank. 7)telephone bill 8)
bank account statement 9)letter from any
recognized public authority

Legal name and any other names used

Correct permanent address

Accounts of companies
Name of the company
Mailing address of the company

1) Certificate of incorporation and

Memorandum & Articles of Association
2) Resolution of the Board of Directors
to open an account and identification
of those who have authority to
operate the account
3) Copy of PAN allotment letter

48

Accounts of partnership firms

1)Registration certificate 2) Partnership

deed 3) Power of Attorney granted to a
partner or an employee of the firm to
Legal name
transact business on its behalf 4) Any
officially valid document identifying the
Address
partners and the persons holding the
Power of Attorney and their addresses
Names of all partners and their addresses 4) Telephone bill in the name of partners
Telephone numbers of the firm and
partners
Accounts of trusts & foundations
Names of trustees, settlers, beneficiaries
and signatories
Names and addresses of the founder, the
managers/directors and the beneficiaries
Telephone/fax numbers

1) Certificate of registration, if
Registered. Power of Attorney granted to
transact business on its behalf
2) Any officially valid document to
identify settlers, beneficiaries and those
holding Power of Attorney
founders/managers/directors addresses
3) Resolution of the managing body of
foundation/association Telephone bill

CHAPTER NO.11
KYC-NEW GUIDELINES
As of 1st January 2011, KYC norms will be mandatory for all retail
investors, irrespective of the amount you are investing. In the past, retail
investors who had invested less than Rs.50000 had not been required to
follow KYC guidelines.

49

In the same breath, with the new ruling it will be mandatory for all investors,
including NRIs and Non-Individuals, to be KYC complaint as of 1st October
2010, even if the amount is Rs.1000.
Know your customer:
KYC is an acronym for know your customer, a term used for customer
Identification Process. KYC was first implemented in February, 2008, for all
investors investing Rs.50000 or more in Mutual Funds in order to comply
with the Prevention of Money Laundering Act of 2002.
It is used by financial institutions and other regulated companies to identify
clients and acquire relevant information. KYC has quickly become an
important global due diligence list with the financial/residential information
collected being used to prevent identity theft, money laundering and terrorist
financing.
How to become KYC complaint:
CDSL Ventures Limited (CVL), a wholly owned subsidiary of Central
Depositary Services (India) Limited (CDSL), has been appointed by the
mutual fund industry, to do the KYC verification of the investors in India.
You will need to submit the following mandatory documents at a CVL point
of service (POS) location:
1. Completed KYC application form
2. Address Proof (A utility bill, passport, letter from your employer or housing
society, ration card, voter ID card, or drivers license are all acceptable forms
of residential proof).
50

3. PAN Card
If you are submitting your KYC application in person you will need to have
the original documents with you, as well as the copies to be processed.
Original will be returned to you after they are verified as accurate.
If you are sending the documents through a courier, documents need to be
attested by a Notary Public, Gazette Officer, or manager of a scheduled
commercial bank. As of now, there are no charges/fees for KYC verification.

NRIS and PIOS

Additional information for NRIs and PIOs (person of Indian origin) will be:
1. Certified True Copy of Passport
2. Certified True Copy of the Overseas address
3. Permanent address
4. For PIO- A certified true copy of PIO Card
All documents must be submitted in English.

How to Check your KYC Verification Status

You can check your KYC Verification Status by going to the CVL website
(www.cvlindia.com). Enter your PAN card number and your status will be
shown as:
51

1) KYC under process: The status will be shown as KYC In-Process.

2) KYC complete: The status will be shown as Verified.
3) KYC rejected: The message will be Invalid data.
For more details regarding your KYC verification you need to get a hold of
the POS where you submitted your KYC application.

Once you become KYC Compliant

The good news is that once you become KYC Verified through CVL, you
will not be asked to go through the process again with CVL.
While making an investment for the first time in a mutual fund, a copy of the
KYC Acknowledgement needs to be attached along with the Investment
Application Form(s)/Transaction Slip(s). Any application forms not
accompanied by a KYC Acknowledgement are liable to be rejected.
Also, CAMS, the registrar and transfer agent, has sent a mail to their
distributors asking them to update their clients in regards to the new KYC
norms.

CHAPTER NO.12

52

KYC IN MUTUAL FUNDS

All investors who wish to make an investment in a mutual fund schemes
are mandatory required to complete the KYC process as per the Prevention
of Money Laundering Act, 2002 (PMLA). This one-time verification is
valid for transactions across all mutual funds.
KYC is applicable for all transactions listed below

New / Additional Purchase

Switch transaction

New Systematic Investment Plan (SIP) registration

New Systematic Transfer Plan (STP) registration

New Dividend Transfer Plan (DTP) registration

You may submit the duly filled KYC application form along with the
relevant documents at any of our Investor Service Centers.
For list of documents to be submitted as per the investor category, please
refer to the list mentioned in the KYC Form.
The new and revised guidelines for KYC are not applicable for the
following category of financial transactions

Existing SIP registration

Existing STP registration

53

Existing DTP registration

Dividend reinvestment transactions of any amount

Micro SIP Registration

KYC MANDATORY FOR MUTUAL FUNDS:

STARTING January 1, 2011, Know-Your-Customer, or KYC, norms will be
mandatory for all mutual fund investors irrespective of the amount you
invest. Till now, retail investors who invested less than 50,000 were not
required to follow KYC guidelines. They could invest by merely submitting
a copy of their self-attested PAN card.
KYC-Compliance: CDSL Ventures (CVL), a wholly-owned subsidiary of
Central Depository Services-India (CDSL), has been appointed by the
mutual fund industry to do KYC verification of investors. So, an investor
needs to submit the following mandatory documents at CVL Points of
Service or POS locations: Completed KYC application form
Address Proof: This could be a utility bill, passport, letter from your
employer or housing society, ration card, voter ID card, or drivers license.
All these are acceptable forms of address proof.
If you are submitting your KYC application in person, you will need to have
the original documents with you as well as the copies to be processed. The
originals will be returned to you after they are verified as accurate. If you
send the document through a courier, documents need to be attested by a
notary, gazette officer, or manager of a scheduled commercial bank. As of
now, there are no charges or fees levied for KYC verification.
Post January 1, 2011, while making an investment for the first time in a
mutual fund, a copy of the KYC acknowledgement needs to be attached
54

along with the investment application forms and transaction slips. Any
application form not accompanied by a KYC acknowledgement can be
rejected.
However, investors need not worry about their existing mutual fund
investments. Even if you want to redeem any investment made before
January 1, 2011, it would be redeemed without any KYC requirement, says
Waqar Naqvi, MD & CEO, Taurus Mutual Fund.
Non-acceptance of Third Party Payments for mutual fund subscriptions
effective November 15, 2010 .As per guidelines issued by the Association of
Mutual Funds in India (AMFI), mutual funds are required to put in place
strong processes by November 15, 2010 to ensure that Third-Party payment
instruments are not used for mutual fund subscriptions.
When payment is made from a bank account other than that of the
beneficiary investor, the same is referred to as a Third Party Payment. In
case of mutual fund subscription with joint holders, the first holder is
considered as the beneficiary investor. In case of payments from a bank
account which is jointly held, the first holder of the mutual fund subscription
has to be one of the joint holders of the bank account from which the
payment is made.
Investors are required to mention the details of the bank account from where
the payment for subscription is being made in the subscription form. The
details required are - bank account number, bank name and the cheque /
demand draft number.
Mutual Funds will be providing a facility for investors to do a one-time
registration of all their bank accounts where they are one of the holders and
from where they expect to make a payment for mutual fund subscription.
55

The registration can be done at the respective mutual fund investor service
centers, along with any one of the following supporting documents viz.
Original cheque or Self attested copy of Cheque/Bank statement/Bank
passbook or a letter from a bank stating the account number and the account
holders name and address.
In case the bank account from where the payment is made is not preregistered with the mutual fund as explained above, investors should ensure
to submit/provide additional documents along with the subscription form as
given below:
a. Cheque Payments
(1) If the name of the first holder is not printed on the cheque, the signature
on the cheque should match with the signature in the subscription form.
(2) If any of the above information is not available on the cheque, investors
should submit any one of the following documents to establish that the
payment is made from the bank account of the first holder viz. Self attested
Copy of Bank Pass book/Bank Statement or a letter from the bank stating
the name of the account holder and the account number.
b. RTGS / NEFT / Fund Transfers
(1) Investors should submit a copy of the instruction to the bank containing
the account number debited for the remittance.
c. Payments via Demand Drafts
(1) Investors should submit a certificate from the Issuing banker, stating the
account holders name and the account number which has been debited for
issue of the instrument.

56

Based on the scrutiny of the document(s) submitted and information

provided by the investor, if it is construed that the payment for subscription
is not from a bank account belonging to first unit holder, the subscription is
liable to be rejected. In case funds are transferred to the mutual fund account
prior to rejection of the subscription, additional documents / details with
respect to the investor and the payment will be sought prior to making a
refund.

CHAPTER NO.13
CASE STUDY
The Berlin-Edwards Case
The Berlin-Edwards story is a good case study of the problems that may
arise if the KYC policy is not properly followed.
Customer Referral: Lucy Edwards, a Vice President at the Bank of New
York (BONY), introduces her husband, Peter Berlin, as a customer to the
bank. Despite her role, Lucy fails to inform the bank of her relationship with
Peter Berlin and the bank never questions the relationship. The referral
details in the application form are left incomplete.
Comment: If the KYC policy was being actively followed, one of the initial
questions as part of the customer acceptance policy should have been What
is your relationship with Lucy Edwards? This is because Lucy introduced
57

Peter as a customer. It also appears that the lack of complete details on the
application form was not reviewed.
Accounts: Over a three-year period, Peter Berlin opens three accounts for
three separate businesses. The three businesses do not engage in any
business transactions. The only activity the accounts are used for is to
receive funds transfers from Russian parties and to forward funds to offshore
accounts or other individuals connected to the Russians.
Comment: KYC was not applied in this case; one of the first procedures is
to verify the business activity and the legitimacy of the customers
themselves. In cases like this, customer identification can include reviewing
business-related documentation, such as rent and utility bills and payroll
payments.

Misuse: These accounts were used by Berlin and his wife to help Russian
banks and other Russian customers evade taxes and other government
regulations. In one instance, one of these accounts received a total of $166
million in one month, mostly through transfers from correspondent banks.
The bank did not look into the origins of these unusually large money
transfers.
Comment: The size of the money transfers, relative to the normal flows
within the account, should have been an indication that due diligence needed
to be applied and a suspicious activity report needed to be filed. Also, more
stringent due diligence should have been applied since correspondent banks
were involved in these transactions.

58

CONCLUSION
KYC policies ensure that businesses can effectively identify, verify and
monitor customers and customer-related transactions.
An effective KYC policy can help prevent or detect money laundering
activities. It can also reduce other types of risks to a business.
The objectives of KYC policy include:
accepting only legitimate customers
59

 identifying customers to understand the potential risks they pose

verifying that customers are who they say they are
monitoring customer accounts and transactions for illegal activities
conducting ongoing customer due diligence particularly where your
relationship with the customer is considered high-risk and/or a suspicious
matter report has been lodged
implementing risk management processes to effectively manage customerdriven risk

Well-conceived and effectively implemented KYC policies can mitigate the

following risks:
Reputational
Operational
Legal
Financial
Concentration

WEBLIOGRAPHY
WWW. WIKIPEDIA.COM
WWW.GOOGLE.COM

60

INSURANCE PRACTICES IN INDIA

Bachelor of Commerce
Banking and Insurance

Semester VI
Submitted
61

In partial Fulfillment of the requirements

For the Award of Degree of Bachelor of Commerce Banking and Insurance

By
D.S.P.MS
K.V.PENDHARKAR COLLEGE
OF
ARTS, SCIENCE AND COMMERCE
DOMBIVLI (EAST)

INSURANCE PRACTICES IN INDIA

BACHELOR OF COMMERCE
BANKING AND INSURANCE

Semester VI
Submitted
In partial Fulfillment of the requirements

62

For the Award of Degree of Bachelor of Commerce

Banking and Insurance

By

D. S. P. M. S
K. V. PENDHARKAR COLLEGE
OF ARTS, COMMERCE AND SCIENCE
DOMBIVLI (EAST)

CERTIFICATE
I, Prof. KIRTI CHUG, here by certify that, of T. Y.B.COM
(BANKING & INSURANCE) of K.V. PENDHARKAR
COLLEGE DOMBIVLI (EAST) has completed the project on
INSURANCE PRACTICES IN INDIA for VI-semester of
the academic year 2012 2013 under my guidance. The
information submitted in this project is true and original to the best
of my knowledge.

PROJECT GUIDE
63

Prof. KEERTI CHUG

K. V. PENDHARKAR COLLEGE
DOMBIVLI (EAST)

64

DECLARATION

I, the student of B.com Banking and Insurance Semester VI

(2012-2013) hereby declare that I have completed this project on
INSURANCE PRACTICES IN INDIA.
The information submitted is true and original to the best of my
knowledge.

ACKNOWLEDGEMENT
65

This project would just not have been complete without the valuable
contribution from various people to whom I interested within the course of
its completion. I would first and foremost thank the UNIVERSITY OF
MUMBAI for designing such precise and practical course.
I thank our principal DR.MRS.MANGALA SINHARKAR and our viceprincipal DR.S.S.DEO. who have relied strongly on me to complete my
project and without them this project would have remained just an idea, and
even I would like to thank our coordinator PROF.MRS.SNEHA.VAIDYA,
my project guide, PROF.KEERTI CHUG for assisting my project.
I would like to express my indisputable thanks to our library head and entire
staff who have lend me a helping hand in finishing this project , whose
names are too numerous to mention here.

66

CHAPTER NO

CHAPTER NAME

PAGE NO

INTRODUCTION TO INSURANCE

2-15

LIFE INSURANCE PRACTISES IN INDIA

16-34

GENERAL INSURANCE PRACTISES IN

35-53

INDIA

IRDA

54-57

CONCLUSION

58

WEBLIOGRAPHY

60

67